What happened
MetLife Inc. (NYSE: MET) saw its stock price plummet in May, dropping 19.2% for the month, according to S&P Global Market Intelligence. Year to date, the stock price is down about 24%, trading at around $55 per share as of market close on June 7.
It was well off the pace of the major indexes as the S&P 500 ticked up 0.3% in May, while the Dow Jones Industrial Average was down 3.5%. The Nasdaq Composite was up 5.9%.
So what
MetLife took a big hit at the beginning of the month after it posted lackluster first-quarter earnings that fell short of expectations.
The life and health insurance company generated just $14 million in net income, down from $1.6 billion a year ago for the same quarter. Adjusted earnings, excluding notable items, were $1.2 billion, or $1.52 per share, down 30% year over year. This missed consensus estimates of $1.85 per share by a wide margin.
Premiums, fees, and other revenue fell 9% year over year to $11.5 billion, dragged down by its business in Asia, which saw a 53% decline in profits, and MetLife Holdings, down 55% year over year. Also, the company suffered $684 million in net-investment losses, down from $517 million in net-investment losses a year ago this quarter. The net-investment losses were driven by the opportunistic repositioning of fixed maturity securities in Japan and a higher mortgage-loan allowance for credit loss in the quarter, reflecting the current environment.
This report sent the stock tumbling almost 17% through the next week, from around $60 per share on May 3, the day of the earnings release, to about $50 per share the next week.
Now what
MetLife made a couple of significant moves toward the end of the month. First, it announced a deal with Global Atlantic Financial Group to reinsure roughly $19.2 billion of U.S. retail life insurance and fixed annuity statutory reserves. This risk-transfer transaction will not only reduce risk, but it will accelerate the run-off of its MetLife Holdings business, which includes its annuities, long-term care, and variable, universal, term, and whole life insurance -- products that the company no longer actively markets in the U.S.
The company also approved a $1 billion increase in the company's share-repurchase authorization, bumping it up to roughly $4 billion.
"This transaction is another critical step in creating long-term value for our shareholders and for all our stakeholders," MetLife President and CEO Michel Khalaf said. He added that
It will reduce enterprise risk and enable us to further invest in responsible growth while also returning capital to our shareholders -- underscoring our financial strength and our balanced approach to capital management.
Analysts at Wells Fargo were bullish on the move, increasing the price target from $2 per share to $75 per share.
MetLife also boosted its quarterly dividend to $0.52 per share, from $0.50. It has a 10-year streak of raising its annual dividend. With a high yield of 3.90% and a low payout ratio of about 32%, it is worth considering as a dividend stock.
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